As Nigeria prepares for life after the COVID-19 pandemic, there is urgent need for the National Assembly expedite action in the passage of the prolonged Petroleum Industry Bill, writes Peter Uzoho
The ravaging COVID-19 pandemic and its attendant economic hardship majorly caused by the drop in the price of crude oil –Nigeria’s largest revenue earner, has seen the federal government struggling to meet its obligations to citizens.
Apart from trying to meet the needs of the citizens at this present time, the government is also strategizing to see how the country can survive even after the pandemic.
To this end, oil and gas experts and policy analysts have advocated for urgent reform of the nation’s petroleum industry so that the space would be opened up for massive investments and increased value addition for the country. At the heart of the call is the need for the current National Assembly to accord an emergency attention to the Petroleum Industry Bill (PIB) that is before it and expedite its passage.
Nigerian oil and gas industry has for long been begging for such reform as the law guiding the industry at the moment has become obsolete and no longer relevant to the present realities having been in place since 1969.
At various meetings and fora, operators and experts in the industry have continued to call for a petroleum law that will help to attract investment to the country.
The PIB has been in the works for close to two decades, as it was first introduced in the National Assembly in the 2000, thereby making it easily the bill that has spent the longest time under our bi-cameral legislative bodies.
Having suffered a setback in the Seventh Assembly, it was decided that a new approach would be adopted to facilitate its passage and signing into law.
The bill was subsequently unbundled into several segments by the Eighth National Assembly, which was aimed at making it easier for the less-controversial aspects of the bill to have easy passage while the more controversial aspects are dwelt more upon.
The PIB was therefore split into four parts, namely: Petroleum Industry Governance Bill (PIGB); Petroleum Industry Administrative Bill (PIAB); Petroleum Host and Impacted Community Bill (PHIB); and Petroleum Industry Fiscal Bill (PIFB).
PIGB Passed by 8th NASS
In January 2018, the Petroleum Industry Governance Bill was passed by the House of Representatives. This marked a significant milestone in the journey of replacing the obsolete Petroleum Act of (1969), as the Senate had earlier passed the PIGB in May, 2017.
Some of the underlying principles include: effective and capable institution, clear roles and accountabilities, and transparency and ease of doing business.
Core objectives in the PIGB include: provision of a one-stop-shop regulatory authority, provision of functional commercial entities, abolition of discretional powers, engendering improved technology and innovation, ensuring clarity of roles and accountabilities and creation of efficient and effective governing institutions with clear and separate roles in the petroleum industry
Others are establishment of a framework for the creation of commercially-oriented and profit-driven petroleum entities that ensure value addition and internationalisation of petroleum industry, promotion of transparency and accountability in the administration of the petroleum resources of Nigeria, and creation of conducive business environment for the petroleum industry operations.
The key institutions in the PIGB are: The minister for policy formation, directing, industry co-ordination and supervision); Nigerian Petroleum Regulatory Commission, which will succeed Department of Petroleum Resources (DPR), Petroleum Products Pricing Regulatory Agency (PPPRA) and Inspectorate – to regulate, promote enabling environment for investments, issue licenses and conduct bid rounds, measurement & hydrocarbon accounting, and environmental regulation.
It will also issue regulations, administer and enforce laws, to have a special investigations unit, to monitor and ensure compliance, to regulate, to ensure best practice, to promote investment and value creation, it has inbuilt accountability mechanisms, and board supervision.
National Petroleum Company (for commercial operations), National Petroleum Asset, Management Company (for commercial operations), Nigerian Content Development & Monitoring Board, Petroleum Technology Development, Petroleum Infrastructure Fund
The PIAB deals with issues relating to administration in the oil and gas industry and it sets out to provide robust regulations, licensing and permits, simplicity and predictability, access to assets, and Encodes Executive Order 001.
On its part, the PHIB bothers on host communities and it sets out ensure inclusiveness, shared prosperity direct disbursement, harmonious relationships, reducing deferments.
Also, the PIFB focuses on the fiscal regimes in the oil and gas industry and it sets out to achieve profitable growth, cost efficiency, increased revenues, making gas work and staying competitive.
However, the Minister of State for Petroleum Resources, Mr. Timipre Sylva; the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari; and the Speaker of the House of Representatives, Hon. Femi Gbajabiamila, have all assured Nigerians that the PIB would be passed this year.
Precisely, Gbajabiamila had in February, assured that the House would pass the bill this month.
Unfortunately, this month is fast running out and not much has been heard about the bill by Nigerians
There has been a flight of new investments opportunities from Nigerian to our neighbour’s in Ghana, Angola and Equatorial Guinea who have more defined laws and governance structure. Experts estimate that the country loses approximately $15 million annually due to the dampened investor confidence in the industry.
Commenting on the delayed bill and its negative impact on Nigeria, the Chairman of Entek Integrated Resources Limited/Lead Promoter of EnergyhubTM, Dr. Amieyeofori Felix, said the delay had led to investors moving their investments away from Nigeria to other African countries that have more stable and predictive fiscal environment.
Felix also frowned upon the move by the senate to draft the bill from the scratch and begin fresh consultation, saying that would further delay its passage.
He even doubted the possibility of starting the bill afresh and finalising it this year.
According to him, “So if you are delaying this, what does it mean? What do you want to achieve? How long? What is wrong with the existing one? How do we amend it? What do we do? People have to sit down and look at this and not just use a fiat.
“For the sake of the economy, for the sake of Nigeria, we have to ask ourselves, is that the best way to go? Are you sure if you open it up now you can close it by 2022? Can you do that?
“And we have to ask them, what is the implication of opening up the PIB again for another stakeholders’ engagement?
“What does it mean to everybody? what does it mean to your investment? What does it mean to your short-term, medium-term and long-term projection? What does it mean to your economy? I think that is the way Nigeria should start thinking going forward.”
Also speaking on the need to have the PIB passed, the immediate-past Chairman of Petroleum Technology Association of Nigeria (PETAN), Mr. Bank Anthony Okoroafor, said: “We must strive to pass the PIB and get the presidential assent. The key is to have the PIB that gives competitive fiscal terms to attract investments and streamline all our fiscal terms to help the country raise revenue and also assure investors of fiscal certainty and win-win situation.”
Also reacting to the issue, the Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, opined that Nigeria cannot afford any further delay in the presentation and passage of the PIB, noting that the absence of an appropriate legal framework had been a major undoing of the Nigerian economy.
According to him, “we have not been able to unlock huge investments, revenues and thousands of quality job opportunities for this reason. The PIB was first introduced to the floor of National Assembly in 2003, over 16 years ago.
“Since then, the bill has undergone several reviews and elicited diverse sentiments among stakeholders, making it one of the most contentious bills in recent memory.”
The LCCI DG explained that the importance of passing the PIB was underscored by the fact that the oil and gas industry was very strategic to the economy of Nigeria, and that the industry currently accounts for about 80 per cent of the government revenue and about 95 per cent of foreign exchange earnings.
He added: “Today, that revenue is facing a serious risk of shortfall from illegal bunkering, declining demand from buyers, stalled investments in the oil and gas sector and emerging technology in renewable energy.
“We are of the view that the government should not be oblivious of the rapidly evolving nature of the dynamics in the global oil and gas industry.
“We are concerned about the face of rapidly evolving competition in the global oil and gas market, and the increasing challenges such as insecurity and uncertain investment climate.
“The policy uncertainty around the oil and gas sector continues to undermine the confidence of investors in the sector. It is of interest to note that several oil producing and service companies have left the country on account of these challenges.”
Yusuf, pointed out that recent feedback from operators in the oil and gas industry showed a number of concerns, among which, according to him, were that the, “Niger Delta region remains a dangerous place to operate for oil companies and this add to operating cost.”
“Special security arrangements such as provision of convoys, security support and flight operations currently add around 12 per cent to Joint Venture (JV) costs; government finds it difficult to meet its own share of Joint Venture (JV) funding obligations.
“This seriously undermines growth in the onshore and shallow water – especially in the country’s gas sector; and it takes an unduly long time to secure approvals for contracts compared to other oil producing countries.
“The above concerns highlight the need for a clear understanding of the contentious issues surrounding previous version of the bill and build stakeholders’ consensus.
The PIB is very critical for Nigeria and we cannot afford to get it wrong or delay its passage/approval any further,” he added.
The passage of the bill would engender investor confidence in the industry and attract more Foreign Direct Investments.
In addition, with oil prices hitting an all-time low as a result of price wars between Saudi Arabia and Russia as well as reduced demand occasioned by the COVID-19 pandemic, it is apparent that oil dominance as an energy source of choice in the post COVID-19 economy will be challenged.
The time is therefore ripe to streamline the number of MDA’s involved in the governance structure in the Nigerian oil and gas industry, which conforms to the overall target of the government in reducing cost of governance based on current realities and scarce resources.
A single regulatory body would ensure end to end project cycle approval which will greatly reduce transaction cost, eliminate regulatory competition and enhance value maximisation.
It will also promote the Executive Order 001 on Ease of Doing Business in Nigeria.